{"id":4379,"date":"2023-08-15T09:19:19","date_gmt":"2023-08-15T09:19:19","guid":{"rendered":"https:\/\/www.umtradings.com\/?p=4379"},"modified":"2023-08-15T09:19:19","modified_gmt":"2023-08-15T09:19:19","slug":"3-concepts-in-forex-trading-key-to-beginners","status":"publish","type":"post","link":"https:\/\/www.umtradings.com\/my\/3-concepts-in-forex-trading-key-to-beginners\/","title":{"rendered":"3 Concepts in Forex Trading Key to Beginners"},"content":{"rendered":"\n<h2>3 Basic Concepts in Forex Trading Key to Beginners<\/h2>\n<p>\nForex trading can be complex for beginner investors if they don&#8217;t understand some basic concepts or elements. Except for margin and leverage mentioned in our previous article, <strong style=\"font-weight:600\">&#8220;Understanding Margin and Leverage: Why Forex Trading May Boost Your Profits&#8221;<\/strong>, we are going to walk through another 3 basic elements key to forex trading in this article.\n<\/p>\n<h2>Pips &amp; Spread<\/h2>\n<p>\nPips are a way to measure the price movement of currency pairs in the forex market, while spread refers to the difference between the buying price and selling price of a currency pair. \n<\/p>\n<p>\n<strong style=\"font-weight:600\">Think of pips as the small units that represent changes in the value of a currency pair.<\/strong> Pips are usually displayed as the last decimal place in the exchange rate. For example, if the exchange rate of the EUR\/USD currency pair moves from 1.2000 to 1.2010, it means it has moved 10 pips. \n<\/p>\n<p>\n<strong style=\"font-weight:600\">As for the spread, it&#8217;s the cost you pay to enter a trade.<\/strong> When you see a currency pair quote, it will show two prices: the higher ask or offer price and the lower bid price. The difference between these two prices is the spread.\n<\/p>\n<p>\nImagine you want to trade the USD\/JPY currency pair, and the current quote is 110.50\/110.55. In this case:\n<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The bid price is 110.50, which means if you want to sell the currency pair, you will receive 110.50 Japanese yen for every US dollar.<\/li>\n\n\n\n<li>The ask price is 110.55, which means if you want to buy the currency pair, you will have to pay 110.55 Japanese yen for every US dollar.<\/li>\n<\/ul>\n\n\n\n<p>In this example, the spread is 5 pips, as the difference between the bid price (110.50) and the ask or offer price (110.55) is 5 pips.<\/p>\n\n\n\n<h2>Take Profit<\/h2>\n<p>Take profit and stop loss are two important tools used in forex trading to manage risk and protect trading positions. Let&#8217;s explain take profit first.<\/p>\n<p><strong style=\"font-weight:600\">Take profit is a predetermined level at which you decide to close a trade and secure your profits. It&#8217;s like setting a target for your amount of profit you want to achieve from a trade.<\/strong> When the market reaches your specified take profit level, your trade is automatically closed to realize the profit.<\/p>\n<p>Imagine you bought the EUR\/USD currency pair at 1.2010, and you set your take profit at 1.2110. This means you aim to capture a profit of 100 pips. If the market moves up and reaches 1.2110, your trade will be closed automatically, limiting your profit to 100 pips.\n<\/p>\n<h2>Stop Loss<\/h2>\n<p><strong style=\"font-weight:600\">Stop loss is a predetermined level at which you decide to exit a trade to limit your potential losses. It&#8217;s like a bottom-line that protects your trades from significant drawdowns.<\/strong> When the market moves against your position and reaches your specified stop loss level, your trade is automatically closed to prevent further losses. <\/p>\n<p>Continuing from the previous example, let&#8217;s say you also set a stop loss at 1.2050. This means you are willing to accept a maximum loss of 50 pips. If the market moves down and reaches 1.2050, your trade will be closed automatically, limiting your loss to 50 pips.<\/p>\n<p>By using take profit and stop loss orders, you can manage your risks effectively, protect your investment, and maintain a consistent and disciplined approach to forex trading. <\/p>\n<h2>Summary<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Pips are a way to measure the price movement of currency pairs in the forex market, while spread refers to the difference between the buying price and selling price of a currency pair.<\/li>\n\n\n\n<li>Take profit is a predetermined level at which you decide to close a trade and secure your profits, resembling a target for your amount of profit you want to achieve from a trade.<\/li>\n\n\n\n<li>Stop loss is a predetermined level at which you decide to exit a trade to limit your potential losses, resembling a bottom-line that protects your trades from significant drawdowns.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>3 Basic Concepts in Forex Trading Key to Beginners Forex trading can be complex for beginner investors if they don&#8217;t understand some basic concepts or elements. Except for margin and leverage mentioned in our previous article, &#8220;Understanding Margin and Leverage: Why Forex Trading May Boost Your Profits&#8221;, we are going to walk through another 3 [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":4259,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[16,18],"tags":[17],"class_list":["post-4379","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-basic","category-knowledge_all","tag-forex-basics"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/posts\/4379","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/comments?post=4379"}],"version-history":[{"count":0,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/posts\/4379\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/media\/4259"}],"wp:attachment":[{"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/media?parent=4379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/categories?post=4379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.umtradings.com\/my\/wp-json\/wp\/v2\/tags?post=4379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}